How & Why Buy Real Estate in Panama

Overseas property investors in search of the next big thing should take a close look at Panama. Famous for its Canal this region has a lot offer international real estate investors.

Panama is an emerging market for international real estate investors and has much to offer, including a tropical climate and low prices. Foreigners may buy and sell land in Panama freely and there are no restrictions. There are a few things that should be understood about the purchase process in Panama, though, before jumping in.

Panama has the highest per-capita income, the largest foreign investment and the most highly developed economic infrastructure in Central America. Economic growth was 6.3% in 2006, continuing a strong five-year upward trend, and the International Monetary Fund (IMF) predicts Panama's economy is set to grow more than any other Latin American country this year.

Panama has for some time now been in a privileged position, not just in Central America, but in the western hemisphere. The Panama Canal, built at the start of the 20th century, turned this tiny tropical haven into a major shipping hub for the world's ocean trade. With the Canal came foreign business and residents, infusing the sleepy paradise with a new energy and bringing the momentum of modernization to Latin America.

The Panama Tourism Master Plan includes incentives to encourage investment in Panama which include no income or capital gains taxes for twenty years and the importation of a wide variety of goods duty free

A lawyer or solicitor is very important in order to do the proper title and deed searches, and the fees will usually run from 1.5%-3% of the purchase price. Often, investors will purchase and sell property through a Panama corporation, which can be set up by a lawyer.

There are two types of property that investors will usually look at in Panama, freehold and right of possession, or ROP. Most of the properties for sale are freehold and you should not have any problems as long as the proper due diligence is done. Right of possession land or property is much like squatter's rights though. There is no official title to the property and it can not be used as collateral for a mortgage. It is perfectly legitimate to buy and sell this property as long as the legal claims are clear, but be aware of it before doing so.

Once the Promise to buy has been signed, the investor's lawyer will carry out due diligence and title searches. Panama has a Public Registry for titles and is pretty reliable, but a good lawyer will look further than that to make sure everything is okay. If the title search is okay and all conditions have been met, then the final contract is drawn up and closing takes place.

Consider Title insurance a protection against loss arising from problems connected to the title to your property. Properties typically go through several ownership changes, and the land on which it stands went through many more. There may be a weak link at any point in that chain that could emerge to cause trouble.There may be unpaid real estate taxes or someone that feels that has a right to the land. Title insurance covers the insured party for any claims and legal fees that arise out of such problems.

The final contract must be in Spanish to be legal in Panama – contracts in other languages are unenforceable. The 2% transfer tax is usually paid by the vendor, and once the property has been closed the title is registered at the Public Registry. ROP property is not registered with the Public Registry and does not qualify for a residency visa.